# State-Space Analysis: Where Does Z₁ Predict REER?

| Model | Dep Var | N | Countries | R² |
|---|---|---|---|---|
| B1l: low-income | log_reer_combined | 605 | 23 | 0.133 |
| B1m: mid-income | log_reer_combined | 948 | 45 | 0.111 |
| B1h: high-income | log_reer_combined | 1,464 | 54 | -0.005 |
| B2c: closed capital | log_reer_combined | 998 | 56 | 0.038 |
| B2m: mid capital | log_reer_combined | 749 | 58 | 0.026 |
| B2o: open capital | log_reer_combined | 1,270 | 58 | 0.031 |
| B3l: low trade | log_reer_combined | 898 | 51 | 0.020 |
| B3m: mid trade | log_reer_combined | 891 | 59 | 0.038 |
| B3h: high trade | log_reer_combined | 809 | 46 | 0.228 |
| B4y: young demo stage | log_reer_combined | 711 | 27 | 0.082 |
| B4t: trans demo stage | log_reer_combined | 939 | 39 | 0.028 |
| B4o: old demo stage | log_reer_combined | 1,367 | 48 | 0.085 |
| B5a: NFA creditor | log_reer_combined | 595 | 49 | -0.039 |
| B5b: NFA debtor | log_reer_combined | 2,422 | 92 | 0.061 |
| B6l: low health_exp | log_reer_combined | 545 | 36 | -0.051 |
| B6m: mid health_exp | log_reer_combined | 768 | 54 | -0.005 |
| B6h: high health_exp | log_reer_combined | 1,019 | 56 | -0.011 |

## Key Coefficients

| Model | Variable | Coef | SE | p-value | Sig |
|---|---|---|---|---|---|
| B1l: low-income | Z_1 | -2.7909 | 0.9890 | 0.0049 | *** |
| B1l: low-income | Z_2 | 0.3980 | 0.1554 | 0.0107 | ** |
| B1l: low-income | Z_3 | -0.0153 | 0.0066 | 0.0201 | ** |
| B1l: low-income | log_gdp_pc | -0.0709 | 0.0369 | 0.0551 | * |
| B1m: mid-income | Z_1 | -0.2494 | 0.7481 | 0.7389 |  |
| B1m: mid-income | Z_2 | 0.0211 | 0.1091 | 0.8469 |  |
| B1m: mid-income | Z_3 | -0.0006 | 0.0044 | 0.8857 |  |
| B1m: mid-income | log_gdp_pc | 0.1668 | 0.0426 | 0.0001 | *** |
| B1h: high-income | Z_1 | -0.9769 | 0.4036 | 0.0156 | ** |
| B1h: high-income | Z_2 | 0.1252 | 0.0569 | 0.0278 | ** |
| B1h: high-income | Z_3 | -0.0046 | 0.0022 | 0.0369 | ** |
| B1h: high-income | log_gdp_pc | 0.0784 | 0.0224 | 0.0005 | *** |
| B2c: closed capital | Z_1 | -0.0969 | 0.7275 | 0.8940 |  |
| B2c: closed capital | Z_2 | 0.0032 | 0.1088 | 0.9768 |  |
| B2c: closed capital | Z_3 | 0.0000 | 0.0045 | 0.9957 |  |
| B2c: closed capital | log_gdp_pc | 0.0099 | 0.0303 | 0.7428 |  |
| B2m: mid capital | Z_1 | -1.4847 | 0.6599 | 0.0247 | ** |
| B2m: mid capital | Z_2 | 0.1764 | 0.0949 | 0.0636 | * |
| B2m: mid capital | Z_3 | -0.0061 | 0.0038 | 0.1057 |  |
| B2m: mid capital | log_gdp_pc | 0.0863 | 0.0247 | 0.0005 | *** |
| B2o: open capital | Z_1 | -1.2058 | 0.4159 | 0.0038 | *** |
| B2o: open capital | Z_2 | 0.1569 | 0.0591 | 0.0081 | *** |
| B2o: open capital | Z_3 | -0.0058 | 0.0023 | 0.0118 | ** |
| B2o: open capital | log_gdp_pc | 0.0814 | 0.0166 | 0.0000 | *** |
| B3l: low trade | Z_1 | -1.7529 | 0.7798 | 0.0248 | ** |
| B3l: low trade | Z_2 | 0.2439 | 0.1126 | 0.0306 | ** |
| B3l: low trade | Z_3 | -0.0093 | 0.0045 | 0.0371 | ** |
| B3l: low trade | log_gdp_pc | 0.0408 | 0.0343 | 0.2343 |  |
| B3m: mid trade | Z_1 | -0.6321 | 0.5035 | 0.2096 |  |
| B3m: mid trade | Z_2 | 0.0737 | 0.0725 | 0.3098 |  |
| B3m: mid trade | Z_3 | -0.0025 | 0.0029 | 0.3903 |  |
| B3m: mid trade | log_gdp_pc | 0.0512 | 0.0164 | 0.0019 | *** |
| B3h: high trade | Z_1 | -1.0438 | 0.4238 | 0.0140 | ** |
| B3h: high trade | Z_2 | 0.1226 | 0.0618 | 0.0474 | ** |
| B3h: high trade | Z_3 | -0.0043 | 0.0025 | 0.0843 | * |
| B3h: high trade | log_gdp_pc | 0.0955 | 0.0147 | 0.0000 | *** |
| B4y: young demo stage | Z_1 | -1.9708 | 0.9167 | 0.0319 | ** |
| B4y: young demo stage | Z_2 | 0.3072 | 0.1445 | 0.0339 | ** |
| B4y: young demo stage | Z_3 | -0.0121 | 0.0061 | 0.0478 | ** |
| B4y: young demo stage | log_gdp_pc | -0.0668 | 0.0255 | 0.0090 | *** |
| B4t: trans demo stage | Z_1 | -1.3309 | 0.7141 | 0.0627 | * |
| B4t: trans demo stage | Z_2 | 0.1660 | 0.1019 | 0.1036 |  |
| B4t: trans demo stage | Z_3 | -0.0055 | 0.0040 | 0.1724 |  |
| B4t: trans demo stage | log_gdp_pc | 0.0522 | 0.0358 | 0.1450 |  |
| B4o: old demo stage | Z_1 | -0.9561 | 0.5537 | 0.0845 | * |
| B4o: old demo stage | Z_2 | 0.1273 | 0.0747 | 0.0886 | * |
| B4o: old demo stage | Z_3 | -0.0048 | 0.0029 | 0.0930 | * |
| B4o: old demo stage | log_gdp_pc | 0.1333 | 0.0202 | 0.0000 | *** |
| B5a: NFA creditor | Z_1 | -2.3122 | 0.7328 | 0.0017 | *** |
| B5a: NFA creditor | Z_2 | 0.3411 | 0.1019 | 0.0009 | *** |
| B5a: NFA creditor | Z_3 | -0.0136 | 0.0040 | 0.0007 | *** |
| B5a: NFA creditor | log_gdp_pc | 0.0681 | 0.0540 | 0.2078 |  |
| B5b: NFA debtor | Z_1 | -0.3945 | 0.3827 | 0.3028 |  |
| B5b: NFA debtor | Z_2 | 0.0342 | 0.0556 | 0.5385 |  |
| B5b: NFA debtor | Z_3 | -0.0008 | 0.0022 | 0.7141 |  |
| B5b: NFA debtor | log_gdp_pc | 0.0505 | 0.0142 | 0.0004 | *** |
| B6l: low health_exp | Z_1 | -1.3511 | 0.8181 | 0.0992 | * |
| B6l: low health_exp | Z_2 | 0.1930 | 0.1231 | 0.1176 |  |
| B6l: low health_exp | Z_3 | -0.0075 | 0.0050 | 0.1375 |  |
| B6l: low health_exp | log_gdp_pc | -0.0061 | 0.0211 | 0.7736 |  |
| B6m: mid health_exp | Z_1 | -0.8848 | 0.5891 | 0.1335 |  |
| B6m: mid health_exp | Z_2 | 0.1061 | 0.0834 | 0.2037 |  |
| B6m: mid health_exp | Z_3 | -0.0036 | 0.0033 | 0.2724 |  |
| B6m: mid health_exp | log_gdp_pc | 0.0735 | 0.0265 | 0.0057 | *** |
| B6h: high health_exp | Z_1 | -2.1138 | 0.5134 | 0.0000 | *** |
| B6h: high health_exp | Z_2 | 0.2834 | 0.0706 | 0.0001 | *** |
| B6h: high health_exp | Z_3 | -0.0108 | 0.0027 | 0.0001 | *** |
| B6h: high health_exp | log_gdp_pc | 0.0610 | 0.0196 | 0.0019 | *** |

*State-space decomposition: which country characteristics drive the sign of Z₁?*